Trade war? What trade war? We’re back to the earnings rally today

U.S. stocks closed up on the fifth day out of the last six on a belief that Chinese rhetoric signaled a withdrawal from an immediate confrontation with the United States over trade.

The shift wasn’t huge. Chinese officials continued to stress that the government will take “necessary” steps to retaliate for the last round of U.S. tariffs and plans for additional tariffs on $200 billion in Chinese goods that would go into effect at the end of August. But at a press conference Commerce Ministry spokesman Gao Feng stopped short of repeating a previous pledge to respond with “quantitative” and “qualitative” measures and didn’t outline specifics about which measures China would retaliate with.

The market found the lack of a specific plan to retaliate encouraging today. The Standard & Poor’s 500 stock index closed up 0.87%. The Dow Jones Industrial Average finished ahead 0.91%. And the NASDAQ Composite ended up 1.39% on the day.

I think this is an example of a market that wants to look past bad news, that is, in fact, ready to grasp at just about any straw, in order to concentrate on the good news coming its way during the earnings season that starts tomorrow. Part of my reason for believing this is watching what stocks went up big today. The list is heavy with the shares of companies that are expected to blow out second quarter earnings when they report. Amazon (AMZN), for example, rose 2.37%; Alphabet (GOOG) was ahead 2.56%; Microsoft (MSFT) climbed 2.17%; Facebook (FB) gained 2.16%; and Twitter (TWTR) was up 3.17%.

With none of these companies set to actually report until next week or later, I don’t expect an immediate test of my “sell on the news” scenario for this quarter’s earnings report. But at the moment this market certainly wants to look ahead and climb further.